How to Form a LLP in Arizona

Business management structures determine many factors of a business, such as how it can be formed and dissolved. There are a number of different business management structures that new business owners can choose from. Depending on which structure a new business owner uses when registering their business, there can have far-reaching consequences.

An example of this would be how some business management structures require its owners to comply with certain formational rules, such as a limited partnership. The rules for a limited partnership dictate that there must be at least one general partner who is assigned to manage the entire business, and at least one limited partner, in order to continue operating as a lawful limited partnership.

Additionally, the business management structure can also determine factors such as:

• How much money business owners can collect from investors;
• The number of members who are allowed to sit on a company board; and/or
• The way in which the business will be taxed.

What Are The Different Types Of Business Management Structures?

Some of the most popular types of business management structures include:

• Sole Proprietorships: Sole proprietorships are businesses that can be formed by one single owner. Although it does not need to be registered with the state, they are considerably easy to register should the business owner choose to do so. The lack of paperwork and minimal procedural requirements make sole proprietorships a simple and inexpensive option.
  • Because there is only one owner of a sole proprietorship, they are solely responsible for addressing all management aspects of the company. Additionally, sole proprietors can be held liable for any risks or liabilities that are incurred by the business.
• Corporations: A corporation is a legal entity that is regulated by state law, and it is considered separate from its owners; meaning, only the corporation itself can be held liable for its debts and liabilities. There are several different types of corporations, and each type is classified according to specific factors. These factors include their purpose, the number of shareholders, the amount of stock that is to be issued, and their overall tax structure.
• General Partnerships: Although there are four different kinds of partnerships, a general partnership is most commonly selected by business owners. A general partnership is formed by two or more people who wish to be the co-owners of a for-profit business. Essentially, as long as both parties intended to make money from a product or service that they offer, they are considered to have entered into a general partnership.
  • General partners can be held both individually and jointly liable for any losses or debts that are incurred by the partnership. They can also be held liable to the other partners if they breach their fiduciary duty to the business, as well as to third parties.
• Limited Partnerships: A limited partnership has considerably stricter requirements than that of a general partnership. As was discussed above, limited partnerships must contain at least one general partner whose job it is to oversee and manage the company, as well as at least one limited partner. As such, limited partners will have limited authority over this type of partnership, and can only be held liable to the extent of their investment. Similar to general partnerships, the general partners involved in a limited partnership can be held both jointly and individually liable for company debts and risks.
• Limited Liability Partnerships: Limited liability partnerships largely provide its partners with the same obligations and financial rights as those that are found in general partnerships. However, partners are required to register the business with the state. While limited liability partnerships offer the benefit of being free from the debts and liabilities of the other parties and the partnership itself, each partner will remain liable for their own actions and/or any conduct that they personally supervise and/or demand.
• Limited Liability Limited Partnerships: This is one of the rarest forms of business management structures, largely because these organizations are not recognized by every state. To reiterate, limited liability partnerships can only be formed in compliance with a state statute. In states in which they are recognized, they are generally chosen for tax purposes. These structures have similar requirements to those of limited partnerships, but with one defining exception: general partners cannot be held personally liable under this formation.
• Limited Liability Companies: Limited liability companies combine the tax arrangements and management styles that are used in partnerships with the liability benefits that are found under a corporation. Because of this, members of a limited liability company cannot be held responsible for the debts incurred by the business. Additionally, this structure permits members to choose how they want to be taxed.

How Do I Form An LLP In Arizona?

To reiterate, a limited liability partnership (“LLP”) is a type of business arrangement that allows the individual partners to be free from the debts and liabilities of all of the other partners. It also allows them to be free from certain debts and liabilities associated with the partnership. In a legal action that is brought against the partnership as a whole, no single partner can be held personally liable. This is how it differs from a general partnership, in which all partners are held liable for all of the partnership’s debts and obligations.

A limited liability partnership is similar to a general partnership in that all partners can actively participate in the management of the business. Additionally, all losses and gains from the business are passed through to the partners according to their partnership agreement.

Once again, state laws vary in terms of how you may form an LLP. In Arizona, the requirements to form a LLP include following:

• File a Statement of Qualification: In order to form an Arizona Limited Liability Partnership, you will need to file a Statement of Qualification with the Arizona Corporate Division.
• Name of Your Limited Partnership: You will need to name the LLP, and ensure that the name of the LLP is not used and is unique from other business entities of trademarks in Arizona. The name of an Arizona LLP must include:
  1. The words “registered limited liability partnership;”
  2. The words “limited liability partnership;”
  3. The abbreviation “R.L.L.P.” or “L.L.P.;” or
  4. The designation “RLLP” or “LLP,” in either uppercase or lowercase letters.
• Statutory Agent: Every Arizona LLP must have a statutory agent. This agent will represent the LLP in any matter, and can accept legal papers on the behalf of the LLP. It is imperative to note that the statutory agent must be a resident of the state of Arizona.
• Publication Requirement: Within 60 days of the Corporate Divisions approving the Statement of Qualification for the LLP, a copy of the Statement of Qualification must be published in the county of the LLP’s principal place of business.
• Partnership Agreement: In the state of Arizona, a partnership agreement is not required when forming a LLP; however, it is recommended.
• Register With The Department of Revenue, And Obtain Business Licenses: Depending on the specific type of business that you are operating, you would need to register with the Department of Revenue if you are selling goods and collecting tax. Additionally, you would need to obtain a business license.
• File Annual Report: In Arizona, you are required to file an Annual Report with the Corporate Division.

In order to form an Arizona Limited Liability Partnership, you must file a Statement of Qualification with the Corporate Division which contains the following information:

• The official name of the LLP;
• The address of office of the LLP;
• The address of the agents of the LLP; and
• The name and address of each partner of the LLP.

Do I Need An Attorney To Form An LLP In Arizona?

You should consult with an Arizona corporate lawyer who is familiar with LLPs if you choose to form an LLP in Arizona. Your attorney can help you create a solid agreement, file all necessary paperwork, and will also be able to represent you in court, as needed, should any legal issues arise.